Following the Money with Colangelo Hire

By Sean Kennedy (@PhillyFastBreak)

A controversial topic regarding the Sixers’recent hiring of Jerry Coangelo is the role played by NBA Commissioner Adam Silver. I’m not going to attempt to wade into a moral quandary about the situation, because frankly, we really don’t know how much was simply facilitating a contact between Josh Harris and Coangelo and how much was a league mandate. Suffice it to say, that even if there was pressure from the league for the Sixers to do something, it could be reasonably argued to be within the league’s rights.

Here’s an interesting bit from the CBA:

“Teams falling short of their revenue expectations are required to work with the league office to develop and implement a business improvement plan, which could include reorganizing business operations, hiring or replacing staff, or adopting new sales strategies. If a team fails to satisfactorily implement such a plan it could forfeit a portion of its revenue sharing payments (up to 25%).”

Now, the Sixers have actually been turning a small profit even during the tank, so it’s not that they’re losing money. However, the league could argue that they’re failing to meet revenue expectations, which is what leads us to the recent ESPN report.

From the ESPN report:

Owners routinely complained about the economic drag the 76ers were inflicting on the league as the revenues of one of the largest-market teams — a franchise expected to contribute more robustly to league revenue-sharing — sagged. For many teams, games featuring the starless and woeful 76ers as the visiting team have been the lowest-attended of the season, sources said.

Of course, the other owners don’t care if the Sixers lose games. They want that to happen, it means there are more wins available for their teams! But once you start taking a chunk out of their wallets, they get ornery. That’s why you’ll never hear them make a peep about whatever the Lakers are doing right now. The Kobe Bryant farewell tour is raking in cash in every city, regardless of what the actual on-court product looks like or how it’s affecting their young players.

First, looking at attendance, teams make roughly $2M per playoff game in ticket sales, parking, and concessions. How much the Sixers could be costing teams during a regular season game is impossible to say without looking at a team’s books for each individual game. Suffice it to say, it can’t be that much as many of the tickets are already sold as part of season packages. You’re basically looking at smaller individual game sales and less parking and concession revenue. Let’s be generous and call it $500k per game the Sixers might be costing a team.

So at most, the Sixers could be costing the league around $20M given that they play 41 road games. That’s an extremely high number since most teams don’t perform nearly as well on a regular basis during the regular season as a hypothetical playoff game, but we’re playing devil’s advocate here.

Then, we take a look at revenue sharing. As compiled in a 2014 post on NBA reddit, the Sixers are the 7th largest market in the NBA by media market population. First off, the Sixers are not receiving revenue sharing money as per Grantland (RIP), the Sixers are ineligible to receive money from the revenue-sharing system because they’re in too large a market. Again, although they’ve been consistently making money, they don’t make enough to contribute, making them a $0 revenue-sharing team.

Meanwhile, bigger markets teams are cutting some pretty big checks. The Lakers cut a $49M revenue check in 2013-14 and the Knicks were next highest at $27M (again, per Grantland). Per the LA Times, the Nets paid $2.7M in revenue sharing and the Clippers paid $7.2M. Let’s say the Sixers would be somewhere in the middle, because even in the best of times they’re not going to be anywhere close to as profitable as the Lakers or Knicks.

If we say $10M, that’s more than the Clippers paid recently, which I have to think is an extremely generous estimate. With the attendance figure I came up with, we’re now looking at a total of $30M the Sixers are costing the league by tanking. Opposing owners want a piece of that hypothetical money.

What really doesn’t make sense to me is how they grumble about the Sixers so often, but you hear much less about these teams taking insane losses. The Hawks received a $20M check last year as part of the revenue sharing system, per a Forbes article this past January (Atlanta is the 12th largest market). Milwaukee and Charlotte received $18M and $22M from revenue sharing during the 2013-14 season, via that Grantland piece. It’s almost like the Sixers are penalized for having smart business practices (whatever you think about the rebuild, you have to admit it’s smart business).

I still maintain the Jerry Coangelo hiring could wind up being a very good thing for the Sixers. It just makes a part of me very cynical that even in something that’s the ultimate in an entertainment escape for fans, the almighty dollar is still behind everything.